2018 (11) TMI 1796 - HC - Income Tax

Penalty u/s 271(1)(c) - defective notice - Non specification of charge - HELD THAT - Substantial question of law is covered by the Judgment of this Court in the case of COMMISSIONER OF INCOME-TAX AND ANOTHER v. MANJUNATHA COTTON AND GINNING FACTORY OTHERS 2013 (7) TMI 620 - KARNATAKA HIGH COURT wherein the said question of law was held in favour of the assessee and against the revenue. It was held that the notice under Section 274 of the Act should specifically state with regard to the concealment or for furnishing of incorrect particulars of income. In view of the answer to the substantial question of law the appeal is disposed off. Consequently, the penalty imposed by the assessing authority is set aside for all the relevant years. - Decided in favour of assessee.

Summary

Issues:
1. Validity of the notice issued under Section 274 read with Section 271(1)(c)

Analysis:
The appeal in this case was admitted to consider substantial questions of law related to the penalty proceedings initiated by the Assessing Officer. The key issues revolved around whether the Tribunal was justified in holding that the Assessing Officer had recorded the satisfaction for initiating penalty proceedings and confirming the penalties imposed for various assessment years. The appellant challenged the Tribunal's decision, leading to a re-framing of the substantial question of law by the court.

The re-framed question focused on the validity and sustainability of the notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. The court heard arguments from both sides and referred to a previous judgment in the case of COMMISSIONER OF INCOME-TAX AND ANOTHER v. MANJUNATHA COTTON AND GINNING FACTORY & OTHERS. In this judgment, it was held that the notice under Section 274 should specifically mention the grounds related to concealment or furnishing of incorrect particulars of income. Based on this precedent, the court disposed of the appeal in favor of the assessee.

As a result of the court's decision, the penalty imposed by the assessing authority for all the relevant years was set aside. The judgment clarified the importance of a valid notice under Section 274 in penalty proceedings and emphasized the need for specific grounds related to concealment or inaccurate particulars of income to be mentioned in such notices.